Legendary Investor: Wosh "Impossible" to Cut Interest Rates, AI Bull Market Can Continue for 1-2 Years

Source: Jin10 Data

Billionaire hedge fund manager Paul Tudor Jones made a major statement in an interview with CNBC on Thursday, saying that the incoming Federal Reserve Chair Powell will not cut interest rates and may even consider raising them; at the same time, he remains optimistic about an AI-driven bull market in U.S. stocks, believing the current rally is in a mid-term stage with 1-2 years of upside potential, but ultimately facing a sharp correction risk.

Powell unlikely to cut rates, may even hike

Regarding Powell’s policy stance as he prepares to take over as Fed Chair, Jones explicitly stated: “Will he cut rates? Absolutely not.”

Powell has previously expressed a tendency toward rate cuts publicly. Currently, the Federal Reserve’s benchmark interest rate remains in the 3.5%-3.75% range, unchanged since December last year. However, his dovish stance will face significant resistance from the Federal Open Market Committee (FOMC)—the most dissenting votes in nearly 34 years were cast at the latest meeting, with most regional Fed presidents hinting in post-meeting statements that “after three rate cuts by the end of 2025, further easing may be possible.”

Jones believes there are even reasons to consider rate hikes in the current environment: “I would consider raising rates, of course depending on the data, but I would definitely consider it. And I think he will be constrained before the midterm elections.”

The current policy environment is complex: the labor market is stabilizing, but ongoing inflation above the Fed’s 2% target is driven by factors such as the Iran conflict and Trump’s tariffs. According to CME Group’s FedWatch tool, futures traders expect the Fed to keep rates unchanged this year, with both rate hikes and cuts having roughly equal and low probabilities.

Historical tech waves suggest AI bull market still has 1-2 years of growth

In the stock market, Jones remains firmly optimistic about an AI-driven bull run, revealing that he has recently increased holdings in related stocks. He compares the current AI development to two major technological revolutions in history: “I see the emergence of the Claude large model in January this year as analogous to the founding of Microsoft in 1981; and the current phase of AI proliferation is similar to the release of Windows 95 in 1995 and the acceleration of internet commercialization.”

Jones points out that both of those technological revolutions triggered sustained “productivity miracles” lasting 4 to 5.5 years, which drove long-term stock market growth. “This AI bull market is about 50% to 60% complete; if I had to pick a timeframe, it could last another 1-2 years.”

In recent years, U.S. stocks have continued to hit new highs driven by expectations of AI transformation, with large tech stocks related to AI infrastructure leading the rally. Chips, cloud computing, and generative AI companies have become hot investment targets, and the S&P 500 has repeatedly reached record highs.

Analogous to the 1999 internet bubble, U.S. stocks may face a sharp correction

Despite optimism about the short-term outlook, Jones compares the current market to the period before the 1999 internet bubble—about a year before the peak in early 2000. He warns: “Imagine stocks rise another 40%, and the total market cap of U.S. stocks reaches 300% to 350% of GDP; a huge, suffocating correction would inevitably follow.”

As a macro trader, Jones says he employs a diversified portfolio strategy, emphasizing: “I always like to look for historical precedents. This is a very special period.”

Additionally, he warns of long-term risks associated with AI: “Eventually, governments will need to intervene with regulation. If left unchecked, artificial intelligence could pose dangers to humanity.”

Jones gained fame for successfully predicting and profiting from the 1987 “Black Monday” stock market crash, and is also a co-founder of the nonprofit organization Just Capital, which rates U.S. publicly traded companies based on social and environmental metrics.